Severance Agreements May Not Be Overly Broad

On February 21, 2023, the National Labor Relations Board (NLRB) held in the McLaren Macomb decision that many standard non-disparagement and confidentiality provisions violate the National Labor Relations Act.  On March 27, 2023, the  NLRB General Counsel issued Memorandum GC 23-05 providing guidance to the regions on the implications of the decision.   

The Memorandum makes clear that severance agreements that contain non-disparagement and confidentiality provisions are subject to the McLaren Macomb decision and violate the National Labor Relations Act (NLRA) Section 7 if the provisions are overly broad.     

Overly broad clauses often include such absolutes as:

  • “The employee may not disclose any confidential, propriety, or privileged information.”
  • “The employee may not disclose any terms of the agreement to any third person, other than spouse.”
  • “The employees may not make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents, and representatives.”

The Memorandum suggests that lawful clauses will include elements such as:

  • Short time duration of restrictions.
  • LImiting the ban on disparagement statements to only those that are “maliciously untrue” or made with reckless disregard.
  • Limiting the ban on releasing information about the Employer to only financial or proprietary trade secret information.
  • No prohibition on employees communicating with the NLRB, a legal forum, the media, or other third parties.

The NLRB is an independent federal agency that protects employees from unfair labor practices and protects the right of private sector employees to join together with or without a union to improve wages, benefits and working conditions.